GovernmentofIndiathroughKhadi and VillageIndustries Commission has introduced Margin Money Scheme( MMS) in order to createlarge
employmentopportunities in rural
areas of the Country. This scheme is to encourageestablishment of villageindustries
in the Countryby providingcertain fixedamount as
Margin Money. Since 1997, this programme is being implemented through
NationalisedBanks. To supplement the efforts of the Nationalised Banks
and to ensure that the scheme reaches the nookand corners of the State, this scheme is being now extended to
Co-operative Banks, Private Sector Scheduled Commercial Banks and State
FinancialCorporation.

2.0FEATURES OF THE SCHEME :

i)
This scheme is applicable for units coming up in rural areas onlyforestablishingvillageindustryprojects.

Rural
Area means :

Which
is classified as ' Village ' under revenue records of the District and
includes the area comprised in any town, the population of which does not
exceed 20,000 as per 1991 census or such other figure as the Central
Government may specify form time to time.

Village Industry means:

Any
industry located in rural area which produces any goods or renders any services
with or withoutthe use of powerand in which the fixed capital investment per head does not exceed Rs.
50,000/-or such otherfigure as the Central Government may specify from time to time.

However
, followingindustries / activities
classified under " NegativeList
"shall not be eligible
for funding under the scheme .

a)Any industry / business connectedwith meat ( slaughtered), i.e.processing, canning and / or servingitems made of it as food, production/ manufacturing.

Please
note that the financialassistance
should not be extended towards the land cost. The beneficiariesshould be encouraged to start theactivities
in their own shed or byacquiring
the shed on rental / lease basis.

Working
Capital :

One
cycle of workingcapital
requirement is also included in the project cost.

v)Banks must ensure investment of " own contribution " of the individual / co-operative society etc., @ 10% of the
total cost of the project for generalcategory
and 5 % in the case of special category.

VI)The Bank will initially sanction total project cost (-) minus own
contribution of thebeneficiary,
i.e., 90% or 95% oftheproject cost as the case may be and disburse the amount in stages
suitably for setting up of the project.

VII)Theprojects established by
the individual beneficiary / entrepreneur are eligible for maximum margin money
of RS. 2.50 lakshs in case of general category and Rs.3.00 lakhs in case of
special category.

VIII)The projects established by co- operative societies/ trusts are eligible
for maximum margin money of Rs.4.00 lakhs. For example:- if the project is
established by general category beneficiaries involving , let us say project
cost of Rs.25.00 laksh, then the margin money is calculated at 25% of the
project cost upto Rs.10.00 lakhs project plus 10% of the project cost for
remaining cost of the project over and above Rs.10.00 lakhs and upto Rs.25.00
lakhs. In case of special category beneficiaries involving, let us say project
cost of Rs.25.00 lakhs, then the margin money is calculated at 30% of the
project upto RS.10.00 lakhs project plus 10% of the project cost for remaining
cost of the project over and above Rs.10.00 lakhs and upto Rs.25.00 lakhs but
maximum limit is fixed at Rs.4.00lakhs
only.

IX)The margin money scheme is applicable for New village industry
projects only. This scheme is not applicable for expansion/ modernisation
/ diversificationof already
existing industry .

X)Once the margin money is released in favour of the loancee, it should be
kept in term deposit for 2 years at Bank level in the name of the beneficiary
and Bank interest accruedon
such deposit will be utilised to service partial interest burden on the loan
disbursed to the beneficiary.

XI)Since margin money is to be provided in the form of middle- end subsidy (
grant(, it will be credited to the borrower's loan account after 2 years from
the date of first disbursement to the borrower / institution. In case, the
Bank's advance goes " bad" before 2 years period is over, margin money
will be adjusted by the bank to liquidate loan liability of the borrower either
in part or full.

XII)In case any recovery is effected subsequently by the Bank from any source
whatsoever, such recovery will be utilised by the Bank for liquidating their
outstanding dues first. Any surplus thereafter will be remitted to KVIC.

XIII)Margin Money will be one time assistance from KVIC. For any enhancement
of credit limit or expansion / modernisation of the project, the KVICs margin
kmoney assistance will not be available.

3.0
TRAINING :

Training
has been made compulsory under this scheme. The cost of the training to be
included in the cost of the project

In
order to enhance quality lending and success rate of the Margin Money Scheme, it
is proposed to conduct training programme for the potential entrepreneurs in
three stage:

a)Entrepreneur AwarenessProgramme
( EAP)

b)Entrepreneurship Developmentprogramme
( EDP)

c)
Skill Development Programe (SDP)

The brief note on each training, programme is given below.

a)Entrepreneur Awareness Programme (EAP)

This
programme is conducted for all the potential entrepreneurs who are willing to
establish rural based industries by availing assistance under Margin MoneyScheme. This programme is intended to create awareness aboutMargin Money Scheme and to identify potential entrepreneurs
who can be given further intensive training on entrepreneurship. The duration of
the programme is one day.

b)Entrepreneurship Development Programme ( EDP)

This
programme will be conducted for the candidates who have attended EAP and shows
entrepreneurial qualities to establish specific industry. This programme is
intensive in nature and all the inputs necessary for becoming a successful
entrepreneur will be provided in this programme. The duration of the training
programme is for 15 days. and preferablyresidential
in nature.

c)
Skill Development Programme ( SDP)

This
training programme will be organisedfor
the candidates Completing EDP and further requires Skill Development in the
specific field. The duration of the training varies from 7 days to 3 months
depending on the requirement of the particular activity .

All
the above training programmeswill
be conducted through established traininginstitutes/
voluntary organisation in Karnataka State. The number of candidates foreach training programme will be decided based on the demand for such
programmes. The State Directorate of KVIC will also be involved in conducting of
above training programmes.

4.0
MARKETING SUPPORT : -

The existing
network of about 340 khadi Bhandars in Karnataka could the utilised to market
the products producedby the
village industries on consignment basis. In addition, the Banks are advised to
encourage more retail outlets under this scheme itself

The
KVIB has launched' NISARGA ' brand for marketing of KVI products. The assisted
units underMargin Money scheme can
use this brand for marketingof
their produce.

5.0
HOW TO CLAIM ?

The
Co - operative Banks, Private Scheduled Commercial Banks and State Financial
Corporation can claim margin money amount on selective basis directly from the
Khadi and Village Industries Board with the following documents.

A
copy of the certified relevant ledger extracts of the loan account to prove
that the total loan has been release to the unit.

Duly
filled -in application form as indicated in proforma -1.

6.0
PERIODICAL REPORTING:

TheHead Office of the Private Sector Scheduled Commercial Banks /
Co-operative Banks / State Financial Corporation has to submit District - wise
quarterly progress report ( as per Proforma-2) to the Khadi and Village
Industries Board, Bangalore and a copy of the report to the directorate of
Economic Research Khadi and Village IndustriesCommission MumbaiSuch report should be submitted for April- June, July-
September, October- Decemberand
January - March quarters. Such quarterly progress reports should also include
the District - wise monthly statement of margin money claim submitted and claim
settled.

7.0
INVESTMENTS SUBSIDY :

In
addition to the Margin Money, certain activities in some Districts / Taluks are
also eligible for investment subsidy on the fixed assets investment as per the
New IndustrialPolicy ( 2001-2006)
announced by the State Government. For the purpose of the subsidy the State is
categorisedinto A, B, C & CZoncs as indicated

The
Districts/Taluks covered under
each Zone for Investment Subsidy is given in

Annex
-1.

8.0
CERTIFICATE OF REGISTRATION :

The
KVIB will issue a Certificate of Registration after due verification of the new
unit by the concerned District Officer. This certificate will facilitate the
beneficiary to avail various incentives and concession offered by the State and
CentralGovernments. The
Certificate of Registration format is enclosed.